In order to address the bankruptcy issue in the financial sector, the government is likely to introduce a separate bankruptcy law during forthcoming monsoon session of Parliament. The proposed bill will help in quick winding up of stressed banks, NBFCs and microfinance institutions while safeguarding the interest of small savers.
A finance ministry committee has suggested a ‘resolution corporation’ to expeditiously deal with issues concerning insolvency of financial institutions, including banks and insurers. The proposed resolution corporation will contribute to the stability and resilience of the financial system by carrying out speedy and efficient resolution of financial firms in distress, providing deposit insurance to consumers of certain categories of financial services and monitoring the systemically important financial institutions.
Further, it will also protect consumers of financial institutions and public funds to the extent possible. After enactment of the Financial Resolution and Deposit Insurance Bill, 2016, the Deposit Insurance and Credit Guarantee Corporation will be dissolved and all its functions will be carried out by the resolution corporation. Last year, the Insolvency and Bankruptcy Code (IBC) 2016 was passed by the Parliament to deal with cases of corporates or companies other than the financial sector.